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Opening Bell: 12.8.22

Opening Bell: 12.8.22

Armageddon won’t be so bad; Dr. Doom doing what he does; Tesla shareholders getting tetchy; and more!

BrokenSphere, CC BY-SA 3.0 <https://creativecommons.org/licenses/by-sa/3.0>, via Wikimedia Commons

Armageddon won’t be so bad; Dr. Doom doing what he does; Tesla shareholders getting tetchy; and more!

JPMorgan looks at an ‘Armageddon scenario’ of the Fed jacking rates up to 6.5%. Its conclusion may be a surprise. [MW]
The JPMorgan economics team assigns a 28% likelihood to that scenario, so it’s within the realms of possibility, even though the rates market only assigns a 10% probability to that outcome…. “In our opinion while there is little doubt that [Fed rates at 6.5%] would be negative for most asset classes including equities, bonds and credit, the eventual downside is likely to be more limited that an Armageddon would suggest,” they say.

‘Dr. Doom’ Nouriel Roubini says a severe recession will cause stocks to drop 25%—and warns zombie companies are in danger [Fortune via Yahoo!]
“In a short and shallow recession, typically, from peak to trough the S&P 500 falls by 30%,” Roubini told Bloomberg. “So even if we have a mild recession…you’ll have another 15% leg down….”
The economist said that he believes the Federal Reserve will be forced to raise interest rates to 6% to fight inflation, forcing many zombies “into distress.”

Tesla investors tell Elon Musk to stop wasting time on Twitter as his erratic tweets prompt them to sell shares [BI]
The world's richest person – who briefly lost the title this week – often tweets late at night…. This has become too much for investors such as Trevor Goodwin, who held Tesla stock for five years before losing confidence in Musk over his tweets….
"It's been so unnecessary," [Tesla investor Earl Banning] told the outlet. "You've got a great car company — just stop it."

The GameStop turnaround promise is failing [Yahoo!]
More than a year into their collective and rather secretive leadership, the entire experiment is beginning to look like an utter failure — underscoring longtime Wall Street concerns about the company's business model such as too many costly physical stores in dying malls and shifts to digital gaming.
Not helping GameStop's turnaround efforts is a complete crash in the once thriving digital asset market that Cohen and Furlong were banking on (see: the NFT market crash or GameStop's strategic partnership with now-defunct FTX).

Blackstone CEO Says Financially Distressed Investors Driving REIT Redemptions [Reuters via U.S. News]
Blackstone shares have lost 15% of their value since Dec. 1, when the New York-based firm disclosed it had for the first time limited redemptions from the REIT, which is marketed to high net-worth investors rather than institutional clients like pension funds and insurance firms. Blackstone relies on the REIT for about 17% of its earnings…. Schwarzman told the Goldman Sachs financial services conference that individual investors were hit particularly hard by a liquidity crunch in Asia, as the Hang Seng Index nosedived and many also had to cover positions they amassed with debt, causing financial distress.

Former Theranos COO Sunny Balwani sentenced to nearly 13 years in prison [CNBC]
Attorneys for Balwani attempted to pin the blame on Holmes, telling U.S. District Court Judge Edward J. Davila that “decisions were made by Elizabeth Holmes….” Prosecutors Wednesday sought a 15-year sentence given his “significant” oversight role at Theranos’ lab business.

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Opening Bell: 5.19.20

Small business Armageddon; does Buffett hate D.J. D-Sol?; Apollo definitely hates Hertz, but not as much as Grimes’ mother hates her new grandson’s dad; the passion of the Son; and more!

By Federalreserve (FED_9638) [Public domain], via Wikimedia Commons
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Opening Bell: 04.23.13

Corzine Sued Over MF Global Failure (Bloomberg) Jon Corzine, the former head of bankrupt broker MF Global Holdings Ltd., was sued by the holding company’s trustee, Louis J. Freeh, for failing in his duty to oversee the company and causing the eighth-biggest bankruptcy in U.S. history. In the suit, filed in U.S. bankruptcy court in Manhattan, Freeh alleged that Corzine, the company’s chief executive officer and a former governor and senator from New Jersey, along with senior executives Bradley Abelow and Henri Steenkamp, failed to act in good faith and implemented strategies that caused the company to fail. CBOE May Retire From Police Beat (WSJ) The parent of the Chicago Board Options Exchange CBOE is considering whether to separate out its regulatory division in the wake of a continuing federal probe into potential conflicts of interest, people close to the discussions said. The largest U.S. options exchange currently oversees the market activity of its own customers as well as those at some of its rivals but has discussed forming a new, independent regulator or handing over those responsibilities to another agency. Splitting off the regulatory unit could shake up the supervision of stock and options traders in the U.S. by either creating a new agency or expanding the role of the independent Financial Industry Regulatory Authority, which has over the past decade taken on oversight responsibilities for NYSE Euronext, Nasdaq OMX Group Inc. and other exchanges. Twinkie offense: Bimbo in snack attack while Hostess is hobbled (NYP) Grupo Bimbo, the biggest baker in America, is working quickly to launch knock-off Hostess products before Twinkies and other snack brands come back to market, The Post has learned. Bimbo has told Teamsters locals it wants them to carry “a newly introduced snack cake product line to fill the Hostess void,” a source close to the situation said. The six to eight snacks will include a Hostess-like cupcake and a Hostess-like Twinkie, a second source said. Hostess shut down in November, and the new owners that bought its assets out of bankruptcy will likely be re-introducing its snack cakes in the fall, according to sources. “I’m hearing Bimbo wants to get [the new products] to market within the next month or two,” said Richard Sheehan, president of New York Teamsters Local 802. Gleacher Investor Urges ‘Rebirth’ as Asset Manager (Bloomberg) Gleacher & Co, the brokerage that closed its fixed-income business, should seek a “rapid rebirth” as an asset manager, according to activist shareholder Clinton Group Inc. Clinton Group, part of a coalition with a 7.7 percent stake in the brokerage, urged stockholders in a regulatory filing today to vote for its slate of directors, who would then use Gleacher’s brand to build a money-management business. Other investors favor liquidating the firm, Clinton Group said. Break up large bank to create regional lenders, argues Archbishop of Canterbury Justin Welby (Telegraph) The newly enthroned head of the Church of England said that Britain needs some parts of the banking system to be "local and not London-based" to address the "concentration" in the industry which he said was one of the "great dangers of the current mess." Speaking at a Parliamentary event on "finding long-term solutions to the financial crisis", Archbishop Welby said there needs to be a "revolution in the aims" of banks to ensure they serve society rather than "self-regarding interest" or even just shareholders. “What we’re in at the moment isn’t a recession but some kind of depression,” he said. “It needs something very, very major to get us out of it, in the same way it took something very major to get into it.” Fed Still Owes Congress a Blueprint on Its Emergency Lending (Dealbook) After the Federal Reserve lent more than $1 trillion to big banks during the 2008 financial crisis, Congress required the central bank to devise specific ways of protecting taxpayers when doling out emergency loans to financial institutions. But nearly three years after that overhaul became law, the Fed still has not established these regulations. BOJ Seen Deploying Price Forecasts as Tool in Ending Deflation (Bloomberg) The BOJ may indicate that its 2 percent inflation target will be reached by spring 2015, the Nikkei newspaper reported April 18. The central bank may upgrade its view on core price gains to at least 1.5 percent for the year ending March 2015, people familiar with officials’ discussions previously told Bloomberg News. British Group Backs Renegotiating E.U. Role (NYT) The new group, called Business for Britain, is intended to counter the intervention of pro-E.U. business leaders who have warned of the dangers of Britain slipping out of the 27-nation bloc and its single market of 500 million people. A statement released Monday to announce the group’s formation was signed by about 500 executives. In the declaration, Business for Britain said Mr. Cameron was “right to seek a new deal for the E.U. and for the United Kingdom’s role in Europe.” Michael Bay Apologizes For Armageddon (Vulture) “I will apologize for Armageddon...We had to do the whole movie in 16 weeks. It was a massive undertaking. That was not fair to the movie. I would redo the entire third act if I could. But the studio literally took the movie away from us. It was terrible. My visual effects supervisor had a nervous breakdown, so I had to be in charge of that. I called James Cameron and asked ‘What do you do when you’re doing all the effects yourself?’ But the movie did fine.”

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Apple To Announce Plans For Cash Hoard (WSJ) Apple will outline what it plans to do with a growing pile of cash by next month, according to Howard Ward, chief investment officer at Gamco Investors Inc. Apple, which has been grappling with investor criticism over the handling of its $137.1 billion in cash and investments, will add $42 billion in earnings to that sum in 2013, Ward said. Greenlight Capital Inc.’s David Einhorn has been urging Cupertino, California-based Apple to issue high-yielding preferred shares to spread the funds among investors. Investors are also urging Apple to consider a higher dividend payout. “We’re going to get an announcement from the company as to how they intend to reallocate some of their cash,” Ward said in an interview today on Bloomberg Radio’s “Surveillance” with Tom Keene. “They will put a floor under their stock at a higher price than it is today.” AIG shareholders win class-action status in lawsuit versus U.S. (Reuters) Two groups of American International Group shareholders won class-action status from a federal judge on Monday in a $25 billion lawsuit by former Chief Executive Maurice "Hank" Greenberg over alleged losses caused by the U.S. government's bailout of the insurer. U.S. Court of Federal Claims Judge Thomas Wheeler also appointed Greenberg's lawyer, David Boies, of Boies, Schiller & Flexner LLP, as lead counsel for the classes. Greenberg's Starr International Co, once AIG's largest shareholder with a 12 percent stake, sued the United States in 2011 over what eventually became a $182.3 billion bailout for the New York-based insurer. It said that by taking a 79.9 percent AIG stake and then conducting a reverse stock split without letting existing shareholders vote, the government conducted an illegal taking that violated the 5th Amendment of the U.S. Constitution. Citing Boies' estimate that "tens of thousands" of shareholders might be affected, Wheeler said "class certification is by far the most efficient method of adjudicating these claims." Both Sides Of SEC Nominee Face Heat (WSJ) In one version, Ms. White is a no-holds-barred crime fighter known for stretching the law to jail mob bosses and international terrorists. In another, Ms. White is a friend of Wall Street who worked for the past decade for the law firm Debevoise & Plimpton LLP, where she represented giant banks such as J.P. Morgan Chase. Blackstone: We're Betting Big On Residential Real Estate (CNBC) "Blackstone is now the largest owner of individual houses in the United States," Schwarzman told CNBC's "Squawk on the Street" Monday, pointing to his company's $3 billion portfolio of residential real estate. But given the nascent recovery in the housing market, they're not buying and selling them quickly but rather renting them out. "It's a good business for us. It's a new thing, but it's also good for America," he said. Icahn Gets Confidential Look At Feds Books (Reuters) Dell Inc has agreed to give Carl Icahn a closer look at its books, less than a week after the activist investor joined a growing chorus of opposition to founder Michael Dell's plan to take the world's No. 3 personal computer maker private...A source with knowledge of the situation said Icahn's and Dell's confidentiality agreement does not have a contractual "standstill" obligation - meaning he is not obligated to stop trading stock in the company. But the activist investor would not be able to trade the stock while he is privy to non-public information in any case, the source added. Phoenix society gives gator happier life with prosthesis (AZC) The alligator is Mr. Stubbs, who is part science project, part human endeavor, and much more. He’s also half-gator, half-rubber. The 11-year-old crocodilian now sports a 3-foot-long prosthetic tail, attached firmly with nylon straps. It replaces the original, which was bitten off more than eight years ago. As far as anyone at the Phoenix Herpetological Society knows, Mr. Stubbs is the first alligator to tolerate, if not sport, a prosthesis. It will take months, however, before Mr. Stubbs learns how to properly use the tail. For now, handlers are happy with smaller milestones. “The fact he doesn’t try to bite it (the tail) is a good sign,” said Russ Johnson, president of the Phoenix Herpetological Society. “Learning how to use it is going to take a lot of training.” The months-long project was overseen by someone well-versed in anatomy. Marc Jacofsky is executive vice president of research and development at the CORE Institute in Phoenix, which specializes in orthopedic care — for humans. While visiting the Herpetological Society, Jacofsky was asked if it would be possible to make an artificial tail for Mr. Stubbs. “I looked and saw there was enough there that we could probably do something that wouldn’t involve surgery,” Jacofsky said. “I also liked the idea because it would improve his life. Our motto at the CORE Institute is ‘Keep life in motion,’ and this certainly fit in with that. I was on board.” Jacofsky estimated the project has cost the Core Institute about $6,000 in donated labor and materials. Mr. Stubbs had been a project since shortly after arriving at the center in May 2005. The then-3-year-old gator was one of 32 confiscated from the back of a truck pulled over near Casa Grande, Johnson said. Officers called in the Arizona Game and Fish Department as soon as the cargo made its presence known. “Scared the heck out of the officer,” Johnson said. “No one expects to find alligators when you look into the back of a truck.” Greece Faces 150,000 Job-Cut Hurdle to Aid Payment (Bloomberg) Greece is locked in talks with international creditors in Athens about shrinking the government workforce by enough to keep bailout payments flowing. Identifying redundant positions and putting in place a system that will lead to mandatory exits for about 150,000 civil servants by 2015 is a so-called milestone that will determine whether the country gets a 2.8 billion-euro ($3.6 billion) aid instalment due this month. More than a week of talks on that has so far failed to clinch an agreement. Failed Sale Of Gleacher Is A Warning For Directors (WSJ) The Dell drama is still unfolding, but for a cautionary tale of how boards, even when they may be well-intentioned, can harm investors of a takeover target, take Gleacher. Shares in the small investment bank have lost more than 60% in the past year as the prospects for a deal evaporated, business dwindled and star traders left. Ironically for a firm that bears the name of Eric Gleacher, who made his name advising on big deals in the 1980s, the company failed to sell itself. At least as some critics see it, its independent directors are to blame. SEC Says Illinois Hid Pension Troubles (WSJ) For years, Illinois officials misled investors and shortchanged the state pension system, leaving future generations of taxpayers to foot the bill, U.S. securities regulators allege. The Securities and Exchange Commission on Monday charged Illinois with securities fraud, marking only the second time the agency has filed civil-fraud charges against a state. Bernanke Provokes Mystery Over Fed Stimulus Exit (Bloomberg) When Ben S. Bernanke asserted last month that the Federal Reserve doesn’t ever have to sell assets, he raised questions about how the central bank can withdraw its record monetary stimulus without stoking inflation. The Fed may decide to hold the bonds on its balance sheet to maturity as part of a review of the exit strategy Bernanke expects will be done “sometime soon,” he told lawmakers in Washington on Feb. 27. This would help address concerns that dumping assets on the market will lead to a rapid rise in borrowing costs. It also allows the Fed to avoid realizing losses on its bond holdings as interest rates climb. Man shot in buttocks at Calle Ocho Festival unaware he was wounded (Miami Herald) The shooting occurred around 4:30 p.m. as the man walked along Southwest Eighth Street and 11th Avenue, part of the throng of revelers who gather annually at the street festival in Little Havana. It’s unclear if something sparked the violence between the two men, or if the shooting was unprovoked. At first the victim did not realize he had been shot and kept strolling along the festival route. “He discovered later that he was bleeding and then passed out,” said Miami police spokesman Sgt. Freddie Cruz. The victim, who was hit in the left buttocks, was taken to Jackson Memorial Hospital, where he is in stable condition and expected to recover.